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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






2. Ed = 0 - no response to price change






3. The additional cost incurred from the consumption of the next unit of a good or a service






4. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






5. Two goods are consumer substitutes if they provide essentially the same utility to consumers






6. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






7. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






8. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






9. Exists if a producer can produce a good at lower opportunity cost than all other producers






10. Entry (or exit) of firms does not shift the cost curves of firms in the industry






11. The output where ATC is minimized and economic profit is zero






12. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






13. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






14. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






15. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






16. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






17. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






18. Total product divided by labor employed. APL = TPL/L






19. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






20. The additional benefit received from the consumption of the next unit of a good or service






21. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






22. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






23. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






24. Demand for a resource like labor is derived from the demand for the goods produced by the resource






25. Entry of new firms shifts the cost curves for all firms downward






26. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






27. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






28. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






29. 0 < Ei < 1






30. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






31. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






32. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






33. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






34. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






35. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






36. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






37. Ed = (%dQd)/(%dP). Ignore negative sign






38. Exists if a producer can produce more of a good than all other producers






39. Entry of new firms shifts the cost curves for all firms upward






40. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






41. AFC = TFC/Q






42. The total quantity - or total output of a good produced at each quantity of labor employed






43. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






44. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






45. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






46. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






47. Ei = (%dQd good X)/(%d Income)






48. The lost net benefit to society caused by a movement away from the competitive market equilibrium






49. Models where firms agree to mutually improve their situation






50. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.